(Updated: 27/02/2000)

N.B. Above Chart is abstracted from Metastock Program

Last week we said, " As for STI, it will probably go down on Monday to test its support at 2150 before some bargain hunting emerge. If we do see a strong rebound in Dow Jones next week then STI will probably break its resistance at 2250 and move towards 2325. However, if STI fails to hold at its support 2150, then we are heading towards 1980-70 major support." While Dow Jones did try to rally last week after touching the 10,000 mark, the rally was rather short and less impressive. In fact, it had eventually moved down and closed at 9862 on Friday (the first time closed below 10,000 mark since 18/10/99), which had signaled that there are more trouble ahead. We had said that if STI failed to hold at its support of 2150 last week, then it should be heading towards 1980-70 major support. The fact that STI had been continued trading below 2150 over the last three days, had suggested to us that a futher downside is in the card. So, how far it has to go before hitting its bottom? Are we in the bear market now? If so, what can we expect in the coming weeks or months?

Evidents have shown that there is an increasing possibility that US may have kicked start its long awaited bear market. In fact, to be precise, It had actually started since last year, where the small cap stocks index, the Russell index, had been experiencing a bear market for more than a year now. The Dow Jones and S&P index had then joined in the party from early this year. As such, we can say that the bear market in US is now slowly unfolded, with each index turned down after one another. The only bright spot that left in US market is perhaps the technology index, NASDAQ.  But then, can it continue to move up, while other stocks (including the blue chips) move south? Can its grow potential out beat the fear of increase in interest rate? We doubt so. While it may take a little while to tame the NASDAQ index due to the huge inflow of Technology Funds, at some points in time it will follow the major stocks trend. It may then create a panic situation that have not been seen for many years. The fact that,   Dow Jones had corrected nearly 1500 points over the past one month, but no analysts seem to have a big worry about it, make us feel very uncomfortable. The complacency by all analysts and investors have us worry that perhaps we have yet to see the worst! Coming back to our Singapore market, the hope of a rally on corporate results season may not be able to materialize. The first test comes tomorrow, with OCBC announced its better than expected result last Friday. If on Monday the share price of OCBC could not rally but sell down instead, then the market may be on the buy the rumor and sell the fact mode. In this case, the market is basically telling us that the good results are now factored into the price and that any announcement of results will be taken by the investors as an opportunity to unwind their position. There are also many uncertainties hanging in the air for the month of March. First, starting 15th March, we will have a shorten down on shares delivery days from T+7 to T+3. This will have a great impact to contra players in the short term and will lead to a period of low volume transaction due to a hold back on short term speculation. Second, the Fed meeting on 21st March will also deter investors to hold new positions when we are approaching the date. Third, the conflict between China and Taiwan may escalate during the final weeks of Taiwan president election. In addition, some surprises may come from Indonesia too. As such, a more conservative approach on investment is still very much preferred. For less experience investors, it would be advisable to stay sideline until the smoke is cleared. Expect STI to move down and test its major support at 1980-70 level. A rebound from there in the latter part of the week, may be possible but will not alter its down trend. As for Sesdaq, it will eventually break its support at 146 and headed lower to test 142 and below.

The following are resistance and support to watch for Dow Jones, Hang Seng and Nikkei next week:

Any break-out on these levels, will certainly affect our STI movement.

Ever since the beginning of the year, we have not changed the labeling of our wave counts on the above chart. This is because, technically the high of 2583 on 3rd January'2000 can still be either wave 1 or wave 5 of bigger wave (5), thought the possibility for the later case has greatly increased over the past two weeks. Only a break below 1970 will confirm that we are now in a bear market (a big wave (II)). For the time being, there are two possibility for the short term wave counts. First, the market has just completed the 5th of the 1st of the wave (5) and is now in its abc 2nd wave. In this case, we may have seen a short term top at 2582.90. Second, we may have just completed the 5th of wave (5), we can only confirm the case when STI breaks below 1970. If this is so, we may be experiencing a big correction soon. We shall let the market tell us the story next week.

(You may like to visit our long term perspective site, for we have just updated the long term wave counts.) 

Events To Watch For The Coming Weeks/Month .

1. Wednesday's National Association of Purchasing Manager index.
2. Friday's February employment report.
3. The possible tension between China and Taiwan during Taiwan President election.
4. The political development in Indonesia.
5. The development on take over of Hongkong Telecom.
6. The movement of US stock market and T-bond.
7. The movement of Dollar vs Yen.
8. The stability of Regional and Singapore currencies
9. Regional stock markets movement.
10. Singapore 3 months Inter-bank rate.